A little bit about whats going on in the world of International Trade Law.

Clash of the Titans: Why China is miffed with the TPP

The Transatlantic Trade Partnership has become the focal point of several debates recently. I’ll try and take up a post on them soon. Here’s the plot in brief:

The story begins in 2005.
Brunei, New Zealand, Chile and Singapore entered into the Trans-Pacific Strategic Economic Partnership Agreement (TPSEPA) to promote regional trade and increase development in the region. Sensing trade vibrations from the other side of the globe, the United States decided to get involved. One can’t help but conjure up the image of a shark tearing through the water towards its prey, guided by its sense of blood.
So, the trade hungry capitalist-shark speeds towards the region and magically, as if out of thin air, developments being cropping up. Negotiations towards a TPP began in 2010 with an insight to exponentially expand the global print of the existing agreement.

Enter: Australia, Japan, Malaysia and Mexico.

But curiously one country was left behind: China.

And there lies the origin of an interesting power-play that is brewing under the sheets of global trade. China claims that the problem started with the “pivot to Asia” policy of the Obama Administration, which it fears is an attempt to “contain” the Asian superpower. As one of the largest economies of the world, China is anxious that it is being actively deprived of its piece in the trading pie. China definitely does not want more troubling coming its way, as Isaac Fish explains.

Supporters of the US[1] claim that the policy is a natural extension of the Open Door policy, which disallows one particular country from gaining trade supremacy but continues to be quite debated. This was especially manifested in the post-depression era of 2008-09 wherein Washington went on a FTA-singing spree with everyone but China.
Others detach themselves from all responsibility, stressing that the idea wasn’t theirs in the first place. It was an initiative taken in the south-east region, and it has only joined as a benevolent trading partner, wanting to increase global commerce.

To be fair, there have been misgivings on part of China as well. In response to its concerns regarding the TPP, China has sponsored the RCEP (Regional Comprehensive Economic Partnership). The RECP is a pan-Asian trading plan which many believe was specifically created to exclude (Read: snub) the United States.

But the real question is: what now? Recently, China’s commerce ministry decided to undertake a “serious study” of the TPP to come up with ways in which integration would be possible. And while all this sounds quite optimistic, the ground realities change the scenario. Realistically, it would be quite difficult for a closed-market economy like China to accept the high threshold that the TPP entails. It would result in the imposition of advanced-country rules in intellectual property, generic pharmaceuticals, local content requirements and liberalization of services, none of which would serve current Chinese interests. Though the seed of TPP was sown in the soil of globally trading inclusiveness, it remains to be seen how the fruit of future negotiations will taste.